Facebook’s Parent Meta Reports Better-than-expected First Quarter Earnings Results, Shares Soar 18 Percent

Meta’s CFO David Wehner

Facebook’s parent company Meta saw its shares soar 18 percent on Wednesday after reporting a better-than-expected earnings report. Revenue, however, fell slightly short of analysts’ estimates.

In the first quarter, the technology titan reported earnings of $2.72 compared to an estimate of $2.56 that analysts had expected, according to Refinitiv. Revenue fell short of the estimates of analysts. Analysts had forecasted revenue to come in at $28.2 billion, according to Refinitiv. Revenue for the quarter stood at $27.91 billion.

Daily active users (DAUs) for the quarter stood at 1.96 billion compared to the 1.95 billion that analysts had expected for the quarter, according to StreetAccount. In the fourth quarter, Meta saw its daily active users decline for the first time. This, however, had made a quick recovery from 1.93 billion in the last quarter to 1.96 billion in the first quarter. Monthly active users (MAUs) for the quarter came in at 2.94 billion, falling slightly short of analysts’ estimate of 2.97 billion, according to StreetAccount.

Average revenue per user (ARPU) came in at $9.54 compared to analysts’ estimate of $9.50, according to StreetAccount.

Revenue was up 7 percent in the first quarter. This marked the first time in its 10-year history as a public company that its growth stayed in the single digits. Analysts had expected a 7.8 percent growth.

For the second quarter of the year, the company expects revenue of between $28 billion to $30 billion. Analysts expect revenue to come in at $30.6 billion for the quarter. The company said in its report that the guidance considers a continuing trend from the first quarter – including the Russia-Ukraine realities. The company reduced its guidance for total expenses for 2022 to between $87 billion and $92 billion. Its previous estimate was between $90 billion and $95 billion. Meta expects the majority of its expense growth to be driven by its family of apps category, followed by its Reality Lab.

In the quarter, the company’s family of apps accounted for 97.5 percent of its revenue in the quarter. $695 million came from Reality Labs; its venture that’s building products for the metaverse. Net income for its family of apps declined 13 percent5 from the previous year to $11.48 billion. Reality Labs lost $2.96 billion in the first quarter. In the same period from a year ag0, it had a loss of $1.83 billion.

Meta expects a decline in monthly active users (MAUs) in the next quarter as a result of its loss of users in Russia over the Russia-Ukraine conflict. Its services are restricted in the country and the company expects this to reflect strongly by the second quarter, CFO Dave Wehner said. He also added that Digital ads could also be affected by inflation and Apple’s recent privacy changes.

On an earnings call with analysts, CEO Sheryl Sandberg told analysts that “We think while these times are challenging, over the long run, we do have a very strong competitive advantage when you look across the opportunities advertisers have to advertise both offline and online,” adding that the company has “been able to close a good part of the underreporting gap and share that with advertisers,” and that it’ll only take more time to make up for the rest.

Meta also has the imminent Digital Markets Act to deal with. CEO Sheryl Sandberg said that she expects a continuing tough regulatory environment. The DMA wants to control the power of these big tech companies.